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Consider a consumer whose utility function is given by U(x, y) = x^1/4y^1/2, where x and...

Consider a consumer whose utility function is given by U(x, y) = x^1/4y^1/2, where x and y represent quantities of consumption of two consumer goods.

(a) Derive and interpret the consumer’s Marshallian demand functions for x and y.

(b) Derive and interpret the consumer’s Indirect Utility Function.

(c) If the consumer’s income is $1000 and the prices of x and y are both $5, how should the consumer maximize her utility? What is her maximum level of utility?

(d) Suppose the price of x rose to $10. Derive and illustrate the resulting income and substitution effects?

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